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The workings of a Chapter 13 Bankruptcy
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The workings of a Chapter 13 Bankruptcy

| Jun 11, 2020 | Firm News

The purpose of a Chapter 13 bankruptcy is to formulate a plan that will allow debt to be consolidated into one affordable weekly, bi-weekly, or monthly payment while at the same time stop any collection activity from happening.  This includes foreclosure and repossession activity as well. This type of bankruptcy is sometimes referred to as “debtors’ court.”

A far more complex process than a simple Chapter 7 bankruptcy, Chapter 13 involves more parties as well.  Every Chapter 13 case is assigned to bankruptcy Trustee who will act as a liason between a debtor and creditors, as well as become the fiduciary for accepting debtor payments and properly disbursing them to creditors.

The process begins with the preparation and filing of an in-depth petition, detailing all known creditors and assets of a debtor, along with income and expense information. Once all necessary information is obtained, a Chapter 13 plan is then formulated to propose before a bankruptcy Judge.  It will divide debts into secured creditors, unsecured creditors, and priority debts, thereby determining the percentage of each payment they will receive. The plan will be administered over either a three or five year period, depending on the amount of debt and the debtor’s ability to pay. From here, the Trustee, debtor, Judge, and creditors will all meet in court and work together to finalize and begin repayment.

Chapter 13 bankruptcy is a complex procedure that is not recommended to be carried out without expert advice and guidance.  It is extremely important that a payment plan be properly calculated.  Otherwise, a debtor could end up still liable for certain debts after receiving a discharge.